Taiwan will introduce a supplementary defense budget of 1.25 trillion Taiwanese dollars (about $40 billion) as China steps up military preparations around the island, President Lai Ching-te announced on Wednesday. Lai said Beijing has intensified drills and “gray-zone harassment” with the goal of potentially seizing Taiwan by force by 2027, according to a CNBC translation of his Mandarin remarks.

The announcement comes amid heightened regional tensions and a diplomatic clash between China and Japan over Taiwan. Lai warned that China has expanded its “infiltration and influence campaigns,” targeting Taiwan’s political system and public opinion in an effort to weaken its democratic institutions.

He highlighted Beijing’s “unprecedented military buildup,” citing increasing provocations across the Taiwan Strait, as well as broader security challenges in the East and South China Seas and the Indo-Pacific region.

China views Taiwan as part of its territory and considers reunification “a historical inevitability,” a claim Taiwan firmly rejects. Over the past few years, Beijing has conducted frequent large-scale military drills around Taiwan and issued strong warnings against what it calls “separatist movements.”

China raised its military budget by 7.2% this year to around $245 billion, with analysts from the Center for Strategic and International Studies noting that a significant portion of China’s military assets is deployed near the Taiwan Strait.

In response, Lai announced that Taiwan aims to strengthen its defenses and reach a high level of combat readiness by 2027.

The tensions extend beyond the Taiwan–China dynamic. Beijing is engaged in a diplomatic dispute with Tokyo after Japanese Prime Minister Sanae Takaichi suggested that a military conflict involving Taiwan could pose a “survival-threatening situation” for Japan. China condemned the comments and demanded a retraction.

U.S. President Donald Trump recently spoke with both Xi Jinping and Takaichi, with experts suggesting that Xi likely sought Washington’s help in pressuring Japan to soften its stance.

Shortly before Lai’s announcement, China’s Taiwan Affairs Office accused Taiwan’s ruling Democratic Progressive Party of undermining the island’s stability and reiterated Beijing’s opposition to any foreign support for Taiwan’s independence.